Individual cost improvements decrease i.e average cost of production initially falls and then rises when more and more units are produced because of the application of the law of variable proportions. According to the law of variable proportions, the total product first increments at the increasing rate and from thereon the marginal product increases. This is the point at which the average cost decreases. After that total product increases at the diminishing rate which implies that the marginal product decreases. This is the point at which the average cost starts increasing.